Sydney B Grade Rents Through The Roof

Sydney’s CBD Core B Grade office rents have hit a record $1000 a square metre as the vacancy rate continues to tighten.

According to Savills National Head of Office Leasing Rob Dickins, a lack of new supply in the construction pipeline, withdrawals for change of use, and the possibility of a prolonged period of low vacancy were all factors driving current demand, as well as increasing demand from smaller professional firms looking to position themselves in a revamped CBD market.

"Rental growth is most commonly a factor of supply and demand and at the moment with the Metro resumptions and change of use of several buildings we have the ‘perfect storm' to push rents in B Grade to where they have never been before," Mr Dickins said.

"In this case the demand has been for smaller suites of up to 400 square metres in the CBD core, where scarcity of availability and quality is creating competitive tension of the like we have never seen before."In the most recent deals Integrated Portfolio Services signed up for 110 square metres at 25 Bligh street at circa $1000 a square metre gross, Trilogy Private Wealth has negotiated a 105 square metre deal, also believed to be above $1000 a square metre gross, and Ashe Morgan a 287 square metre deal for $1170 a square metre gross, both at 139 Macquarie Street, while further down the road at 151 Macquarie Street, Harrington Properties has taken 294 square metres at $1400 a square metre gross.

Mr Dickins said the City of Sydney’s recent release of the draft Central Sydney Planning Strategy had also been a demand factor and one which would prove more significant in coming years as whole, or substantial, building vacancy enabled owners to realistically address additional construction.

"The City of Sydney’s plan recognises that liveability needs to be addressed as the CBD moves into a phase of a greater residential population.

"While the plan will remove some height restrictions it will also demand a greater proportion of mixed use spaces that deliver services to a living city and increasingly that will drive demand for office space, especially boutique office space for smaller tenants who may live in or on the fringes of the CBD,’’ Mr Dickins said.